NIGERIA'S PERSONNEL INCOME TAX (PIT) AND VALUE ADDED TAX (VAT) RATES ARE LOWER THAN THE UNITED KINGDOM AND THE KINGDOM OF LESOTHO- BY DR. TONYE CLINTON JAJA

As usual, I will begin with the preface, one of the beauties of being a legal scholar is the academic freedom that one enjoys to pass a comment and critique on almost every subject matter in this world.

Nothing, no subject matter is off limits for the legal scholar.

So now, I am delving into the matter of the current Tax Reforms Bill that is undergoing enactment at the National Assembly of Nigeria.

Many people have written and spoken against it for several reasons.

Last year, I was appointed by the Office of the Vice-President as a legislative drafting consultant for the three Tax Reforms Bills currently before the National Assembly.

So I can speak from an enlightened place on this subject matter. In the course of my analysis of the three Tax Reforms Bills, I made some startling discoveries.

Sentiments aside, Nigeria currently enjoys one of the best rates of personnel income tax and value added tax (VAT).

For example, VAT in Nigeria is currently 7.5% whereas here in Lesotho it is 15%. I was shocked when I saw it on the receipt I was given after I did my shopping for a lunch meal at the ShopRite along Constitution Road, Maseru, Kingdom of Lesotho.

So what it means is that you buy a lunch meal that costs ₦10,000, you would pay an extra ₦1,500 that is a lot of money in both their currency and ours, enough to buy a loaf of bread here in Lesotho.

Also, as at September 2024, the Personnel Income Tax (PIT) rate in Nigeria is 24%. The proposed tax reform Bills is seeking to introduce a more equitable formula whereby those who earn more income (beginning from ₦800,000 per annum) are subjected to a higher rate of taxation.

Anyone with a rudimentary knowledge of the principles of tax law (which I studied in my third year at the University), knows that "proportionality" is a cardinal principle of taxation laws. In other words, the rate of tax must be commensurate and proportional to the size of the personnel income.

This is a reasonable standard and an international best practice anywhere in the world. The rate of PIT is usually on a graduated scale.

On the other hand the PIT in the United Kingdom is between 40-45% for persons earning as from £125,140 upwards. It is 20% for those earning lower. This is as of July 2024.

This may appear as mere statistics until you find yourself as a staff or worker within the United Kingdom.

In the year 2009, I myself was a staff and personnel (Research Fellow) at the British Institute for International and Comparative Law (BIICL). I remember when I first received my letter of appointment and employment when I saw the figure, amount stated therein as my salary. I was so excited when I did the computation and converted it to naira, I was smiling that I was a "millionaire in naira".

I failed to look at the rate of personnel income tax.

So when the pay day arrived, I was shocked to receive a figure that was far, far less than the amount stated in my letter of appointment and employment as my gross monthly salary. I went to the accountant to clarify the matter, and by the time he finished showing and explaining to me the taxation matter, I was numb.

It was then, it dawned upon me that the seriousness of a popular cliche (and joke) that is often repeated in the United Kingdom at that time was: "all the workers and staff in the United Kingdom are working for the Queen of England". In other words a huge chunk of every worker's salary is deducted to fund the lifestyle of the Queen of England.

That is when I understood the reason why some persons hold more than one job in the United Kingdom because the amount of taxation on one job alone makes the salary from the said job to be insufficient to cover monthly expenses.

I have a former school mate from the Rivers State University who did his PhD in the United Kingdom and decided to stay back. After twenty years of his residency in the United Kingdom, he was still working three jobs, at three different universities, just to make ends meet. And the ends are never meeting.

On this matter of VAT, PIT and other forms of taxes, we have to be honest to ourselves, Nigeria is not as bad as other countries.

We have a lot to thank Almighty God about on this matter.

© DR. TONYE CLINTON JAJA,

Executive Director,

Nigerian Law Society (NLS).